Midcap mutual funds have delivered higher long-term returns to investors using systematic investment plans (SIPs), outperforming smallcap funds over longer periods of time.

According to Equirus Credence Family Office, the Nifty Midcap 150 Total Returns Index (TRI) produced an average return of 17.3% over 10-year rolling periods, compared to 15.1% for the Nifty Small Cap 250 TRI.

Key Highlights

• Midcap funds beat smallcaps consistently in long-term SIP returns, offering better stability and risk‑adjusted performance.
• Studies show midcaps provide strong risk-adjusted returns—balancing growth potential with lower volatility than smallcaps.

The trend continued for 15 years, with midcaps outperforming smallcaps, which gave 14.1% returns.

According to Chanchal Agarwal, CIO at Equirus Credence Family Office, "Midcap stocks have outperformed smallcaps over the long term, offering better risk-adjusted returns, stronger business fundamentals, and higher survivability."

Businesses with market capitalizations between 101 and 250 are categorized as midcaps, and those with a market capitalization of 251 or less are categorized as smallcaps.

Compared to smallcaps, which comprise a wider and more varied range of companies, the midcap segment is more concentrated. The valuations and performance of midcap stocks have been significantly impacted by recent large-scale fund inflows through SIPs.

Shorter duration analysis reveals that midcap index returns of 13.9% and 17.4% over three and five years, respectively, outperform smallcap returns of 11.9% and 15.11%.

"The best smallcap companies go on to become midcap companies, so it is logical that they offer better long-term returns," said Trideep Bhattacharya, CIO of Edelweiss Mutual Fund. 

Midcap stocks have been more stable than smallcaps, with much lower drawdowns over time. Equirus Credence Family Office data show that the Nifty Midcap 150 TRI has the lowest five- and ten-year rolling monthly SIP returns of -8.2% and 6%, respectively.

In contrast, the Nifty Smallcap 250 TRI experienced much steeper minimum returns of -21.2% and 0.2% during the same periods.

Also Read: Mutual Fund SIPs Maintain Momentum, Hits Rs 26,688 Crore in May: AMFI

Midcap stocks are currently trading at a higher price than large-cap blue chips. The Nifty Midcap 150's price-to-earnings (PE) ratio is 35.21, higher than the Nifty 50's 22.29 and the Nifty Smallcap 250's 33.82.